The energy price rise is no longer a temporary nuisance for the Riksbank

Another sign that the Riksbank will indeed hike its policy rate in December

Inflation in line with expectations, and will rise further in June

The May CPI data shows CPIF inflation at 2.1 percent, fully in line with expectations, but above the most recent Riksbank forecast. CPI as well as CPIF excluding energy also increased in line with our expectations (1.9 and 1.5 percent y-o-y, respectively). Important to remember is that the electricity price rise actually cooled somewhat in May, but has since accelerated again. This contributes to our view that June CPIF inflation will be even higher than today's May Reading, roughly 2.3 percent.

The energy price rise is no longer a temporary nuisance for the Riksbank

The energy price surge of the last two years continues. This means that it can hardly be seen as a volatile nuisance that the Riksbank should disregard. Instead it is looking more like a driver, starting to push inflation via expectations and second-round effects hitting firms' cost pressure.

Another sign that the Riksbank will indeed hike its policy rate in December

We stick with our forecast of a policy rate hike in December. Today's outcome adds to the view that 2018 will be the second consecutive on-target year for the Riksbank (see graphs below).

Headline inflation above the Riksbank forecast, well in line with the inflation target